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April 27, 2004—Europe cannot deal with the challenges
of its ageing population by depending on immigration alone, UK research
released today says.

Researchers from the think-tank RAND
Europe question the often made assumption that an influx of workers
from non-EU countries will sustain the labour force sufficiently to
pay for the pensions and healthcare needs of a greying Europe.

Instead a range of actions needs to be considered—including
controversial areas such as rationing expensive healthcare to older
people and raising the retirement age, says the think-tank.

Other ideas such as paying people to have more children,
through the tax and benefits systems of individual countries, should
also be looked at.

The European Union commissioned report looks at the relationship
between government policy and demographic trends and says European Union
(EU) members and EU accession states need to consider radical alternatives
tackle the demographic challenge.

“Replacement immigration does not offer a feasible
solution to the problem of population ageing,” the report points
out.

The report says that while immigration may be effectively
used to slow, as opposed to prevent, population ageing “the sheer
number of immigrants required to offset population ageing….would
be unacceptable in Europe’s socio-political climate.”

RAND argues that even if large scale immigration was allowed
in Europe, in the long term these immigrants themselves would age.

The demographic challenge in Europe is caused by increased
life expectancy and a declining birth rate that has fallen below its
natural replacement levels of 2.1 children per couple. This is leading
to an expanding dependent population of older people and contracting
pool of economically active younger people.

The report says that if the challenge is not tackled it
will have “potentially damaging consequences on European economies”
through reduced economic productivity and heavily burdened pension,
social and healthcare systems.

One of the report’s authors Jonathan Grant at RAND
Europe in Cambridge said: “The report highlights the huge problem
facing all European countries, that if not tackled will have a dire
impact on Europe’s standard of living and economic productivity.

“Research done for this report demonstrates that
action can be taken to tackle the problem but a comprehensive and broad
policy approach is needed.”

Three policy options exist that European governments could
consider to tackle the problem: encouraging an increase in the birth
rate; allowing increased immigration and policy reforms including healthcare
rationing; raising the retirement age; and encouraging more women into
work.

The report authors say that given the current climate
surrounding immigration, they have focused more on how changes in fertility
can be used as a strategy for preventing an ageing population.

They highlight that France and Sweden in particular have
had success using comprehensive packages that include family allowances
(France) and attractive provisions for parental leave and childcare
(Sweden).

They caution, however, that no single approach can be
recommended for fertility policy. Given the cultural and political diversity
of Europe, each country needs to define its own approach to controversial
issues surrounding population policy such as contraception, the family
and abortion.

The report points out that policies to manage population
take effect slowly and therefore may be less attractive to politicians
who prefer quick-fix solutions.

“There is a disconnection between the electoral
cycle of four to five years and the much longer cycle of population
policy.”

On healthcare the report says: “The costs of medical
care have become a salient issue because of a rapidly-growing population
in need and dramatically increasing health care costs for the impaired
elderly.

“More people are expected to live longer and at
a greater cost to society, as people who would have died from some accidents
and strokes 20 years ago are now living much longer. Additionally, there
is little incentive for patients to seek less costly medical care. A
significant policy issue is whether the supply of medical personnel
and facilities, as well as expenditure on them, should be increased
in order to fulfil rising demand, and to what extent the state should
subsidise these costs.”

On raising the retirement age, RAND Europe says: “Some
countries have already implemented this measure. Germany increased the
age for full benefits from age 60–63 to age 65 and in the US the
1983 amendments to the Social Security Act raised the age of eligibility
for full social security benefits from 65 to 67 by 2027.

“A second option consists of an increase of the
so-called ‘early retirement age’ or the prohibition of compulsory
retirements. In Germany and Italy, access to these early retirement
benefits have already been restricted. Similarly, France has tightened
eligibility requirements; the number of years of contributions that
are required for full benefits is being increased from 37.5 to 40,which
became fully effective in 2003.”

Dr Grant added: “The implications of the report
have potentially profound implications for European governments.

“Many of the measures governments may need to take
will be unpopular, such as pension reform and raising the age of retirement.
There is also the question about whether governments should be interfering
in the private affairs of the family.

“But unless action is taken to address these issues
Europe will be unprepared to meet the challenge. The stated aims of
the EU’s policies of employment and economic growth, as well as
social cohesion, could be threatened.’”

##

Notes For Editors:

The report “Low Fertility and Population Ageing:
Causes Consequences and Policy Options” (RAND Europe and RAND
Labor and Population MG 206-EC, pp. 152) is available in pdf format
from the RAND website at http://www.rand.org/pubs/monographs/MG206/

For a digital copy of the report
or further information contact Jonathan Grant at RAND Europe in Cambridge,
01223 353329 or jgrant@rand.org.

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